(.net) technology and society

March 10, 2007

How to Make Money Like a Porn Star

For the sake of argument, let's assume that you are able to create
content that people want to consume. How do you monetize it? The adult
content industry continues to lead the way in monetizing content,
adopting new technologies, and testing distribution models. At SXSW Interactive, porn publishers gathered to share best business practices with the next generation of mainstream media.
(Disclosure note: Panelist links undoubtedly go directly to adult
content - but I'm not sure, since I was too chicken to click through
myself!)

Revenue

Amelia G left magazine publishing for the superior cash flows of the Internet. She brought along this lesson, however: Edgy or niche content is best sustained via a subscription model.
In traditional publishing, it's unusual for a magazine to be
subscription-driven rather than advertising-driven. In pornography,
however, you don't have the option of being advertiser-driven. A
subscription model is not only possible, but necessary, since most
advertisers are not comfortable with adult content.

As a result, adult publishers adopt the rigor necessary to cultivate a
sustainable base of subscribers. An adult content consumer will pay $50
to watch 20 minutes of video. If they like it, they'll go to the
producer's
(or star's) core site and sign up as a member for $20/month in order to
receive
unlimited amounts of that content. This is the long tail that
mainstream media sites dream about reaching.

After her transition to Internet publishing, G also looked at how
people made money in affiliate networks. She found that it's not the 5%
commission on clothing or books. Instead, affiliates make money from the 50% commissions associated with memberships. The top payouts? Subscriptions to the Wall Street Journal or the Harvard Business Review.

Porn site producer John Halcyon Styn confirmed
the value of participating in affiliate marketing programs.
As an illicit, somewhat restricted consumer good, porn benefits from a
high perceptive value. Accordingly, the high average revenue per user
(ARPU) means that the adult industry is highly lucrative for
affiliates. Because of this dynamic, there's an interesting quirk of
adult content businesses: publishers often end up promoting their
competitors. For
example, if a user comes to Site A and doesn't join up, Site A could
recommend Site B and still capture the affiliate revenue. No matter what site the customer actually joins, the first site that the user visits is likely to earn revenue. Any time someone visits your site, you
have an opportunity to market something.

Marketing and promotion

The adult industry consistently must separate out their site's freeloaders from its potential paying customers. The upsell from free content to paid membership is the publisher's most important goal for each new site visitor.

Styn provided crisp instruction on how to achieve this goal: "If you want a paying customer, then you need to
offer more convenience, quality, or quantity than the user would be
able to find for free."
e.g., if most people only tasted the free cream
puff samples at Costco, Costco would stop offering them. Instead, a
critical mass of shoppers is saying "I have to have MORE of these!" and
buying cream puffs by the case. Whether at Costco or at a content site,
a business must both tell the difference between these customers and
optimize its revenue against the promotional costs of serving both of
thema them.

Seska Lee called out the biggest down side of running your own affiliate program: the need to produce fresh content.
Affiliates always want something
new. That being said, ready-made
promotional materials tend to pay for themselves once distributed to
affiliates. Lee also noted that affiliates may make sales commitments
that your site
can't deliver on - e.g., they advertise that you offer photos of
brunettes, but you only have photos of blondes. Also, some affiliates
will want to actually have
licensed copies of content, rather than simply redirecting customers to
your own hosted content..

Site and content design

Styn and G agree: People often criticize adult sites for their poor design, but bad design is often intentional. Put simply, 'bad design' produces more revenue. Not just more profits, but more revenue.
Why? High production values and good, updated designs imply mainstream
media. Simple, unsophisticated, or even bad design helps the user to
either (1) feel like they are in the know, or (2) believe that the
content is more 'real.' This feedback was the exact opposite of the advice given by Kathy Sierra
in her earlier keynote. I suspect that this in part due to the
difference between 'what kind of content consumers like' and 'what kind
of applications do consumers want to use,' but comments from experts
here are welcome.

This contradictory path to success is also reflected in the content
itself. As Styn slyly commented, people aren't watching porn for its
production values. And again, low production values means that the
content appears more real. Very few producers are able to justify the
extra expense
of raising the production values, relative to the additional revenue
that
is brought in. In addition, the frequency of video releases is
prohibitively high. 5000
video units sold is
a good number, so you have to make lots of videos, and make them
cheaply.

Like podcasting and internet television, adult content is highly
profitable, niche-focused industry. It will be interesting to see how
these business practices inform the scalable business models that end
up emerging from the current crop of Web content producers.

Comments

How to Make Money Like a Porn Star

For the sake of argument, let's assume that you are able to create
content that people want to consume. How do you monetize it? The adult
content industry continues to lead the way in monetizing content,
adopting new technologies, and testing distribution models. At SXSW Interactive, porn publishers gathered to share best business practices with the next generation of mainstream media.
(Disclosure note: Panelist links undoubtedly go directly to adult
content - but I'm not sure, since I was too chicken to click through
myself!)